Entries from April 2008 ↓

Is Dr. Ron Paul Electable? He is the most conservative member of the Congress, and is a strict constitutionalist and fiscal conservative. He has always told the truth, and we must believe him when he says teh economy is in BIG trouble…

Ron Paul can still be elected the President of the United States of America…

Writes Vijay Rajwani: “Some frontline information on Dr. Paul’s book signing today in NYC: I asked for a long lunch break to go see him – I arrived at 1:25 pm, to find that the top floor of Borders on Wall St. was engulfed in lines going in every direction! It was previous to this that Borders had RUN OUT of books! (the event was scheduled for 1pm). At the rate the line was going, it would have taken me 2 or 3 hours to get to see him – and people were still packing in, so I had to leave to get back to work. I’m disappointed I didn’t get to see him, but glad at how much support there was – so much so that Borders was not ready for it!”

On CNN this morning, to talk about The Revolution: A Manifesto.

Frank Rich on–among other questions–Ron Paul, the republican primary, and what they portend for McFascist in November. (Thanks to Anders Mikkelsen.)

Milton Friedman back in 1959 argued commercial banks should earn interest on the reserves they are statutorily required to hold on deposit at the central bank. That refrain was later picked up by the Federal Reserve. The rationale: by using open market purchases and sales of securities, the Fed adjusts the quantity of reserves banks hold and thus the interest rate they charge on excess reserves banks lend to each other (the federal funds rate). But since required reserves earn no interest, they are a tax, and like all taxes, create distortions. Over time banks minimized the portion of their deposit base subject to requirements and met a growing proportion of the remaining requirement through currency in their vaults rather than cash on deposit with the Fed. The Fed worried that eventually required reserves would be so low it would have trouble implementing monetary policy. If banks earned interest on reserves, these problems would be mitigated.

Another benefit: at present, if the Fed oversupplies reserves through open market operations in the morning, banks may end up lending out at any rate they can get in the afternoon, causing the funds rate to plunge well below target. If they earned interest on those reserves, they wouldn’t lend them out at below that rate, preventing such late-day crashes.

Marvin Goodfriend, a former research director at the Richmond Fed and now a professor at Carnegie Mellon University, argued back in 2002 that paying interest on reserves would free up open market operations to pursue other goals, such as changing the mix of securities and loans the Fed held to affect the liquidity in various parts of the financial market. For such “broad liquidity management … a central bank might need the latitude to enlarge its balance sheet considerably and to vary the size of its balance sheet within a wide range independently of interest rate policy,” he said in a study presented at a New York Fed conference. “That is not possible” unless the Fed paid interest on reserves.
Mr. Goodfriend’s paper presciently foreshadowed the Fed’s current situation. Since August it has sold off or lent out half the $800 billion in Treasurys on its balance sheet in return for less liquid loans and securities to restore normalcy to credit markets. It faces the prospect, though small, of using up the remainder if the credit crisis worsens.

It could expand its balance sheet without limit if it was willing to let the federal funds rate fall to zero (what the Bank of Japan called “quantitative easing” when it tried that strategy). But that could fuel inflation or create other distortions in the financial market. Getting the right to pay interest on reserves would remove that constraint.

The Fed got the authority to start paying interest in October 2011 under the Financial Services Regulatory Relief Act of 2006, signed into law on Oct. 13, 2006. The reason for the late implementation was budgetary. Paying interest on reserves will reduce the amount of income the Fed earns on its securities portfolio and remits to Treasury each year. Congress pushed back the date of implementation to minimize the near-term impact on the deficit.

The cost isn’t astronomical. The Congressional Budget Office estimated that the cost in the first year would be $253 million, rising to $308 million by the fifth year, for a total $1.4 billion over five years. It based that estimate on the assumption that the federal funds rate would average 4.5% from 2008 to 2016 and the Fed would pay interest at a rate 0.1 to 0.15 percentage points below that. It projected required reserves of about $8.3 billion.

The law also gives the Fed the flexibility to eliminate required reserves altogether. Banks would still have to maintain some reserves at the Fed to clear payments with each other. CBO assumed the Fed would not phase out those requirements.

The Fed has already raised the issue with Congress, although it hasn’t made a formal push. Getting Congress to agree to swallow the cost a few years early in principle shouldn’t be hard since Congress has already set aside its adherence to the principal of “Paygo” — that all revenue reductions and cost increases need to be offset elsewhere. The Fed could also further reduce the cost by arranging to pay interest only on excess reserves — the amount that exceeds the required minimum.

A risk for the Fed is that if Congress agreed to give it the authority to pay interest on reserves immediately, it might ask the Fed to so something in return — say, help out the student loan or auction-rate securities market. The Fed’s request could become bogged down in legislative wrangling. The Fed may thus elect to wait until events make the need more pressing. At that time, Congress may be willing to quickly pass a clean bill. President Bush would almost certainly sign it. –Greg Ip

Yesterday I heard Geoffrey Garin, Hillary’s new strategist, on MSNBC, using the Rev. Wright controversy to question whether Obama is out of touch. (The link’s not up yet, or I’d quote him). He made similar comments in the Times re Pennsylvania voters.

I knew Garin in college more than 30 years ago when we worked at the Harvard Crimson newspaper. He was a special guy–softspoken, funny, brilliant. He was also a radical. In 1973, on an anniversary of the Boston Tea Party, Garin called for violent revolution in the United States:

To commemorate the symbolic significance of the Tea party without
acknowledging the significance of the commitment to violence is to miss
the point altogether. Boston did not win its "Cradle of Liberty" name
because of a special intellectual quality of its leaders but because of
a special leaders were willing to resort to violence under conditions
they thought to be oppressive… Samuel Adams and the South End Mob were the first to understand
Tom Paine’s admonition, "Moderation in principle is always a vice."

…America and much of the world is living dangerously close to
oppression. … Whether Americans will soon become steadfast in their resistance
to oppression depends on their coming to understand what resistance is
all about. The way we celebrate the anniversary of the Boston Tea Party
will gauge the depth of that understanding…. Freedom is on the wane in this country and repression is on the rise
all over the world. We can no longer sit back and swap stories about
the good old revolution. We have to start worrying about the present.
On this anniversary we must recognize that the patriots of Boston acted
wisely in overthrowing their oppressors and the time is come to express
our confidence in what our forefathers did by doing it ourselves. [my emphasis]

Here, following Agnew’s resignation in 1973, he says that the government will fall, and again spoke of revolution:

The government in Washington can not survive under these circumstances,
and under these circumstances the
government should not survive…. America will be governed in any case, but
the question is by whom. If not by the people, then by a strong
executive. These are revolutionary times, and we must decide now whom
we want to win the revolution.

Yes, Geoff Garin was 20 years old when he wrote these pieces. (A mature 20, I must say). I’m sure he stopped calling for revolution after college, probably because he grew out of the ideas– maybe too because you can’t make a living as a leftist. But I knew Garin well enough to be sure that his political impulses, ones of fairness, respect for oppressed peoples, live on somewhere in his thinking to this day. Those impulses once made him call for violent revolution.

It is helpful to read his writings because they demonstrate: how much people grow, how common revolutionary statements have been in the left (even in the Jewish meritocracy, of which Garin and I are members). But mostly because they show that the continuum of left-center ideas, which are now coming back into American life, includes Wright, Garin, and Obama.

I will be "looping," to use Rev. Wright’s words, more of Garin’s firebrand writings later.

Perhaps. But certainly not Keyes’s last word. That will never happen.

My dad knew Hubert Humphrey back in the early 50s, and used to say of him, “He gets paid by the word.”

So too Alan Keyes, who is hardly a modern-day Cal Coolidge. (…a young woman sitting next to Coolidge at a dinner party confided to him she had bet she could get at least three words of conversation from him. Without looking at her he quietly retorted, “You lose.”)

Keyes had a show on MSNBC some time back that I actually watched a couple of times. It was stunning. He would ask his invited guest a question, interrupt him after, oh, about ten or fifteen seconds, and then gab unilaterally for the rest of the half hour, while the baffled guest looked on, silent and bewildered.

James Antle has a good - a very good — piece on the recent debacle.

Watch the clip here.

The Republican party continues to be terrified that Ron Paul will run as an independent. Their own internal polling show he’d get so many votes he’d cause the defeat of McCain. Such a run is not in the cards, but the trouble the Paulians continue to give the red-state fascists is thrilling. Watch for it to continue right through the McCain coronation in St. Paul. Some Paulians are bound to point out that the would-be emperor has no clothes.

Ron Paul will speak at UNC Chapel Hill and Duke University this Friday; details here.